Should Your Small Business Lease a Truck or Buy a New One?

As a small business owner, the decision over whether to lease a truck or buy one probably comes down to one simple factor: money.

Or more specifically, when you want to spend the money.

Lease a Truck or Buy?

Buying a truck is an upfront capital investment, whereas leasing a truck spreads your payments out and is easier on your cash flow.

The US Small Business Association cites cashflow as “the lifeblood of a business and critical in its growth”–so leasing a truck can be a great option for many small businesses.

A truck lease is an operating expense. You don’t have to find a large pot of cash to purchase the vehicle, but you do have a regular monthly payment to make. The lifetime cost will be higher but may include maintenance and repairs.

That said, if you do buy a new truck, it will be a tangible asset of your business that you can usually claim tax depreciation on. It can be cheaper in the short term, but it’s tying up a lot of capital–so it really depends on your business finances and cash flow.

If your year-to-date profitability is over $100,000 it probably makes more sense to buy the truck. Otherwise a lease might be a better option.

How Much is a Truck Anyway?

Let’s take one truck as an example–the classic semi. A new Mack Semi costs between $100,000 and $150,000. Leasing this would cost about $2,000 per month.

How do those figures fit with your business finances?

Tesla may be about to disrupt the industry with their new electric Semi truck (production planned for 2019), with a $150,000 price point for one with a 300-mile range. They estimate more than $200,000 in fuel savings over the lifetime of the truck! It’s certainly the best new truck in terms of being environmentally responsible.

Of course, payment plans are available for purchasing trucks as well. So if you don’t have a cool $100k sitting around, that could be an option.

On a smaller scale, the Ford F-series pick-up truck has been the best-selling vehicle in the US for over thirty years. While it used to be mainly for farmers and manual laborers, nowadays the pickup truck is a vehicle that suits modern life for many people.

Whether you’re hauling a trailer full of equipment to a client site, or transporting your kid’s sports team, the pick-up is a popular choice. Pricing is from $30,000 to $70,000 for a new one.

Pick-up trucks have come a long way in terms of their styling and comfort too. So it may be a utility vehicle that suits your small business needs as well as your family. As well as Ford, popular brands nowadays are Ram, Chevrolet, and GMC.

Electrical pickup trucks may be on the market soon–offering significant long-term savings in fuel costs.

Advantages of Leasing a Truck

As well as being easier on cash flow, there are several other advantages to taking on a lease:

Maintenance and repairs are generally included

A drop in resale value isn’t your problem

You can keep up-to-date with new vehicles and technology

It simplifies your monthly accounting because you know you have just one payment (rather than varying depending on maintenance)

Some lease companies provide preferential fuel pricing via partners

Preventative maintenance checks are also included

Mandatory vehicle assessments will be taken care of by the leasing company

If you need additional trucks or vehicles, the leasing company can provide these

Replacement vehicles are available whilst yours is being fixed.

Advantages of Owning a Truck

Ok, so leasing is sounding pretty attractive right now.

Hold on a minute though, because owning your truck does have some cool advantages too:

The purchase price is considerably cheaper than the end price of leasing

You can write off all or part of the cost of the truck in the year you buy it, which will reduce your taxable income that year

At the end of a lease you’ve paid more, but you still don’t actually own the truck

Once you’ve paid it off, it’s yours

You’re not paying for any extras–you just pay for what you use (for example tires, brakes and other consumables)

If you want to take your truck off-road, you can do so without risking extra wear and tear costs that might be incurred on a lease

You can choose your own maintenance and repair shop

There will be a down-payment each time you change or upgrade your lease

Most leases have a monthly or annual mileage allowance, with extra payments if you exceed that distance. If you drive a lot of miles, owning might be better for you.

How Will You Use the Truck?

In order to decide which option is best for you, it’s worth examining why you actually want a truck.